Understanding Economic Decisions
What is the definition of economic decision-making?
Economic Decision Making
What is the quantity of a good that consumers are willing to buy?
Demand
What type of economy is characterized by government control of resources?
Command Economy
What is the first step in the decision-making process?
Define the Problem
What is it called when resources are insufficient to satisfy all needs?
Scarcity
What is a trade-off?
What you make when you give something up to have something else.
What happens when demand exceeds supply?
Prices increase
Name one characteristic of a market economy.
Resources are owned and controlled by individuals
What is the third step in decision-making process?
Evaluating the advantages and disadvantages of each choice.
How does scarcity influence decision-making?
It forces individuals to make choices among alternatives
What is opportunity cost?
The value of the next-best alternative that you were not able to choose.
What is market price?
The point where supply and demand are equal
Describe a mixed economy.
Combines elements of command and market economies
What is the final step in the decision-making process?
Review Your Decision
Give an example of scarcity in everyday life.
Limited availability of fresh water in drought conditions
How do personal and societal factors influence economic decisions?
They shape priorities and available resources influencing choices.
How do seasonal changes affect supply?
They can increase or decrease availability of certain goods
What distinguishes a traditional economy from a market economy?
Traditional economies produce goods and services as they have always been done.
Why is it important to review your decision after making it?
To make better decisions
What is the relationship between scarcity and choices?
Scarcity necessitates making choices about resource allocation
How can understanding economic decisions shape your future planning?
It helps in making informed choices regarding spending, saving, and investing.
Explain the impact of consumer behavior on supply and demand.
Increased demand can lead to higher prices and adjustments in supply
How does capitalism define the relationship between ownership and economic resources?
It emphasizes private ownership rather than government control
Discuss the importance of defining the problem in decision-making.
It sets the foundation for making informed choices
How does the concept of opportunity cost relate to scarcity?
Opportunity cost arises from the need to prioritize limited resources effectively